As companies become more comfortable operating in the cloud, Software as a Service (SaaS) has emerged as a critical component in the corporate tech stack. It eliminates the need for installing and maintaining software, reducing the burden on your IT team. The subscription-based model also makes it cost-effective since you pay only for what you use, and you can scale services to fit your needs. Moreover, SaaS is accessible from any internet-connected device, offering flexibility, scalability, and remote access.
Despite these benefits, many companies grapple with spiraling SaaS expenditures, finding it hard to strike a balance between essential needs and services that add no value. In this context, SaaS spend management plays an essential role in controlling costs and improving procurement efficiency. Let's explore what SaaS management is and some key strategies to reduce procurement costs:
What Is SaaS Spend Management?
SaaS spend management involves identifying, controlling, and optimizing your company's SaaS expenditures. It encompasses all processes and strategies to manage software expenses, including software contract management, license optimization, renewal tracking, usage analysis, and more.
Spend management should start from the moment you sign up for a new software service and end only when you cancel it.
Why Is SaaS Spend Management Crucial for Businesses?
According to Gartner, worldwide end-user spending on public cloud services is projected to reach approximately $600 billion in 2023, up from $491 billion in 2022. By 2026, 75% of organizations will implement a digital transformation model predicated on the cloud as the primary underlying platform.
Given the growing reliance on SaaS solutions in modern businesses, spend management is crucial. Without a comprehensive understanding and management of these costs, organizations can easily overspend on redundant, underused, or unnecessary software subscriptions. Proper SaaS spend management helps to eliminate waste, ensure value for money, increase visibility into software usage, and ultimately, enhance operational efficiency.
5 Effective Ways to Reduce Your SaaS Spend
A critical aspect of SaaS spend management is cutting software costs wherever necessary. Here’s how you can do that:
1. Consolidate Your Software Subscriptions
A recent industry report by Nexthink revealed that about half of all installed software and licensed SaaS applications went unused by employees. This problem can occur in several ways. A company may forget to cancel a free trial of a SaaS tool or pay for a subscription that is no longer needed or used. They may also end up with multiple subscriptions that serve the same purpose. For instance, if two separate departments don’t collaborate on SaaS procurement, they could end up with licenses for two different products that essentially do the same thing. You can better manage software expenses by consolidating software subscriptions with these simple strategies:
- Inventory Existing Subscriptions: Create a comprehensive list of all active SaaS services across your organization.
- Identify Redundancies: Highlight services that perform similar functions and can be consolidated.
- Promote Cross-Departmental Communication: Encourage departments to share information about their SaaS use to prevent duplicate subscriptions.
2. Employ Software Contract Management
Software contract management is a key aspect of SaaS spend management. This involves careful review and negotiation of software contracts to ensure that you're getting the best value for your money. Be proactive in your contract renewals and aim for longer-term contracts, as these often come at discounted rates.
3. Take Advantage of Volume Discounts
Cloud subscriptions often offer their customers price breaks based on the number of users. The more users, the deeper the discount. Therefore, you’ll want to determine how many people across each department need the software and subscribe with the largest user count.
A GPO can help you save money on SaaS apps by pooling the purchasing power of its members who have comparable needs to your own.
4. Promote Internal Software Awareness
The more your team knows about the software you use, the more effectively they can use it. Regular training sessions help your team better understand the full capabilities of your software, potentially eliminating the need for additional software purchases.
5. Use a SaaS Management Tool
SaaS management tools can help you track your SaaS subscriptions, usage, and costs. These tools can provide valuable insights into your software spend and can be invaluable in managing and reducing your overall SaaS expenditure. When procuring SaaS tools, assess these factors:
- How many choices are available on the market?
- What is the pricing model for each tool?
- How does the tool meet your needs?
- How much value does the tool offer?
Take time to research SaaS software before deciding on which is best for your business.
CenterPoint Group Can Help You Manage Software Expenses
Don't let escalating SaaS costs drain your budget. As a leading GPO, CenterPoint Group leverages the collective buying power of our members to secure unbeatable rates from top-tier suppliers. We help businesses big and small across numerous industries save as much as 30% on procurement costs.
Consult with us today and learn how to manage your software expenses efficiently.